The Economic Situation

September 20, 2012

The nation's economic situation continues to fail in some areas and deliver in others. Depending on the observer, the economy may be right where it needs to be or the pace of growth has been abysmal. In any case, the economy in 2012 is what can be considered a mixed-bag economy, says Bruce Yandle, a distinguished adjunct professor of economics at the Capitol Hill Campus program at the Mercatus Center at George Mason University.

Overall, the economic outlook is bleak -- the United States and many developed nations are not at pace with where they need to be. Developing countries are experiencing a significant increase in the share of world gross domestic product (GDP) growth.

In the United States, places like North Dakota, Texas and Utah are also showing signs of strong GDP growth. This is because those states are sites for the burgeoning knowledge economy, which is characterized by entrepreneurship, fast growing firms, a large base of scientists and engineers, and high levels of research and development.

One factor that continues to directly affect many consumers is the price of gasoline.

  • Last January the average national price was $3.29 per gallon.
  • This month, the average price is $3.84 a gallon -- a 16 percent increase in eight months.

In addition, overregulation of the economy is becoming a fixture in the everyday lives of many businesses. Many industries have had to adjust to an increase in regulations over the past decade.

  • The paper manufacturing industry, for example, faced a 39 percent increase in regulations in 2010 from 1997.
  • Over that same time, the chemical manufacturing and oil and gas extraction industries faced 26 percent more regulation.
  • Finally, the rail transportation industry saw a 21 percent increase in regulations.

While there is a lot of uncertainty about the future of the economy, Yandle offers his take on the 2012-2013 economic outlook:

  • GDP growth will range from 2 percent to 2.5 percent.
  • Retail sales will rise as wealth is created.
  • The unemployment rate will hover between 8.2 percent and 8.9 percent.
  • Inflation will rise to 2 or 3 percent.
  • There may also be an increase in interest rates by the end of 2013.
  • Finally, overall gas prices may increase modestly.

Source: Bruce Yandle, "The Economic Situation," Mercatus Center, September 11, 2012.

 

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